2006 review and 2007 outlook: latin american abs/mbs...

STRUCTURED FINANCE Special Report

2006 Review and 2007 Outlook: Latin American ABS/MBSDomestic Markets' Issuance Continues To Grow

AUTHOR:Alonso Sánchez RosarioAnalyst(5255) [email protected]

CONTRIBUTORS:New YorkMaría Muller Senior Vice President(212) 553-4309 [email protected]

Carlos MaymíVP/Senior Credit Officer(201) [email protected]

Victoria MorenoVP/Analyst(212) [email protected]

Carlos BenavidesAVP / Analyst(212) [email protected]

BrazilLuis BarrettoAVP/Analyst(5511) [email protected]

ArgentinaMartin Fernandez-RomeroAVP / Analyst(5411) [email protected]

Javier PereiraSenior Associate(5411) [email protected]

CONTACTS:Susan KnappManaging Director(212) [email protected]

Brett HemmerlingInvestor Liaison Specialist(212) [email protected]

WEBSITE:www.moodys.com

CONTENTS• Opinion and Outlook

• 2006 Review and 2007 Outlook

• Country Transaction Summaries

- Argentina

- Brazil

- Chile

- Colombia

- Costa Rica

- El Salvador

- Jamaica

- Mexico

- Peru

• Appendix

- 2006 Latin American Structured Finance Rated Transactions

- 2006 Latin American Structured Finance Upgrades/Downgrades

OPINION AND OUTLOOK

In 2007, Moody's expects that the rate of growth of Latin America'sdomestic securitization markets will continue to outpace growth in LatinAmerica's cross-border capital securitization markets. We also expect thekey trends of 2006 - the increase in number of new issuers, and theexpansion into new asset types and structures - to continue into 2007.

This is particularly likely to be the case in the region's largest economies,Brazil and Mexico, which, together, accounted for approximately 73% ofall domestic securitizations that came to market in Latin America during2006. Brazil's securitization market experienced growth rates in 2006 of42%, and Mexico experienced 100% growth in 2006 (without consideringIPAB transactions).

In Brazil, the main asset classes that are most likely to be securitized in2007 are auto loans, consumer loans and trade receivables. In Mexico,the securitization of mortgage loans should continue to be one of the pil-lars of the local structured issuance and contribute to a large share of theregion's total domestic securitization volumes in 2007. We also expectthe securitization of different asset types, such as leases, vehicle loans,consumer loans and credit linked notes, to grow in the domestic Mexicanmarket in 2007.

January 19, 2007

Similarly, the domestic securitization market in Argentina in 2007 is expected to experience robustgrowth rates, continuing with a growth trend that since 2003 has yielded a compounded average growthrate of 110%.

As shown in Figure 1, in 2006 the aggregate volume of asset-backed securities (ABS) and mortgage-backed securities (MBS) from Latin American issuers totaled US$15.3 billion. Approximately 11% of thattotal was issued in the cross-border market, compared to 16% in 2005. Moody's expects that cross-border securitizations will continue to represent a relatively smaller percentage of the total Latin American2007 securitization activity mainly driven by favorable domestic market dynamics that currently allowissuers to find attractive funding sources in each country.

2006 REVIEW AND 2007 OUTLOOK

2006 Issuance ActivityIn 2006, combined issuance of Latin American domestic and cross-border ABS and MBS increased 6%to approximately US$15.3 billion from US$14.5 billion a year earlier (refer to Figure 2).

This increase was driven by the growth in the domestic markets' issuance to US$13.6 billion in 2006from US$12.2 billion in 2005, although it was partially offset by a decline in the cross-border markets'issuance to US$1.7 billion in 2006 from US$2.3 billion in 2005.

Figure 12006 Latin American Securitization

Domestic and cross border(Total issuance US$15.3 Billion)

Figure 2Annual Latin America Securitization 2000-2006

Cross border Market

US$1.7 Bn 11%

Domestic Market

US$13.6 Bn 89%

1.0 1.5 1.7 2.48.1

12.2 13.6

3.06.9

3.95.6

3.0

2.3 1.7

0

5

10

15

20

2000 2001 2002 2003 2004 2005 2006

US$

Billi

on

Domestic Market Cross border Market

Domestic Markets' Issuance Continues To Grow Moody’s Investors Service • 2

Lower issuance in the cross-border market was the result of lower cross-border issuance in Brazil during2006 as a result of favorable economic conditions in the Brazilian market and frequent cross-borderissuers finding alternative funding sources at attractive rates outside of the securitization arena. Domes-tic market issuance surpassed the volume of total cross-border market issuance for the third year in arow since Moody's started tracking issuance trends in the Latin American securitization markets in 1998.

Transactions backed by mortgages and real estate related assets continued to fuel the expansion ofsecuritization in Mexico, while the cost-effective issuing vehicles Fundos de Investimentos em DireitosCreditorios (FIDCs) continue to drive the growth of the securitization market in Brazil. The Argentinesecuritization market continued to show signs of strengthening during 2006 and was the third largestdomestic market of the region (behind Brazil and Mexico). Personal and consumer loans, as well aspréstamos garantizados,1 back a large percentage of securitizations in Argentina.

THE DOMESTIC MARKETS: Growth Continues at a Lower Rate Aggregate domestic structured finance activity in Latin America totaled approximately US$13.6 billion in2006, 12% higher than the US$12.2 billion volume in 2005.

The domestic Latin American securitization market has shown positive growth rates over the last threeyears. The main drivers for this growth are: a) local institutional investors are becoming more familiar withstructured finance products; many now consider such structured products as viable investment alterna-tives to the government paper they purchased historically, b) new assets in the domestic markets aregiving investors a broader range of investment alternatives, and c) international investors (includinghedge funds) have recently begun investing in securitizations issued in the local markets as a result ofincreased liquidity and a continuing search for yield and portfolio diversification.

Brazil Moves to First Place, Followed by MexicoDuring 2006, Brazil and Mexico accounted for 73% of total domestic securitization in Latin America.Brazil increased its participation to 41% in 2006 from 32% in 2005 and is now the largest player in thedomestic securitization market in Latin America. Mexico follows with 33% of the domestic securitizationmarket volume in the region (refer to Figure 3).

Argentina increased its participation in 2006 and represented approximately 19% of Latin America'sdomestic securitization volume in 2006, clearly distinguishing itself as the region's third largest localsecuritization market.

1 Préstamos Garantizados are obligations of the Argentine government

Figure 32006 Latin America Domestic Securitization by Country

(Total issuance US$13.6Bn)

Brazil40.6%

Chile2.4%

Peru0.5%

Costa Rica0.4%

Colombia4.9% Argentina

18.7%

Mexico32.5%


Mortgage Loans and Vehicle Loans Leading Assets in Local MarketsTransactions backed by mortgage loans constituted the largest asset class securitized in the domesticLatin America markets in 2006 (refer to Figure 4). MBS domestic securitizations accounted for US$2.9billion in 2006 (21% of total domestic securitization volumes) in the region. During 2006, Mexico's MBSdomestic securitization market totaled US$1.7 billion of the region's US$2.9 billion. MBS transactionswere also closed in Colombia, Brazil, Argentina and Chile during 2006.

Securitizations of vehicle-backed loans increased substantially during 2006 to US$2.2 billion and repre-sented 16% of total local domestic securitizations in Latin America. This growth was driven by theUS$2.1 billion market for this type of asset in Brazil.

Consumer loans and credit-linked notes were the third most popular asset type to be securitized in thedomestic market in Latin America. These represented 14% and 13% of the total domestic issuance vol-umes in the region, respectively.

THE CROSS-BORDER MARKET: Volumes Decreased For the Third Consecu-tive Year

Latin America's cross-border securitization volume decreased by 26% to US$1.7 billion in 2006 fromUS$2.3 billion in 2005.

An important factor contributing to this decline was that frequent cross-border issuers, especially thosedomiciled in Brazil, continued to find alternative funding sources at attractive rates outside of the securi-tization arena.

Brazil Remains as the Primary Source of Cross-Border Latin American Issuers Despite the decline mentioned above, Brazilian entities were yet again the most active cross-border LatinAmerican issuers in 2006 contributing 39% of the total dollar volume of the region's cross-border securi-tization issuance (refer to Figure 5).

Figure 42006 Latin America Domestic Securitization by Asset Type


Leasing1.2%

Private Label Credit Card

1.9%Take-out

3.0%

Guaranteed BOE0.5%

Auto Loans16.1%

Consumer Loans14.3% Credit Linked

Notes13.1%

Credit Cards3.6%

Personal Loans5.0%

Other5.1%

Future Flow7.1%

Trade Receivables

8.0%

MBS21.1%


In 2006, Brazilian cross-border issuance totaled US$0.7 billion, compared to US$1.1 billion in 2005.HSBC Brasil, a new issuer of cross-border bonds backed by future remittances, closed a $200 milliontransaction rated Aaa by Moody's based on a financial guaranty provided by Financial Guaranty Insur-ance Corporation (FGIC) also rated Aaa.

Salvadorian entities ranked second in 2006 with securitization volume of US$525 million (31% of totalcross-border securitization volumes in the region). Banco Cuscatlán, the largest issuer in 2006, closed aUS$300 million transaction backed by remittances sent to beneficiaries in El Salvador, Costa Rica, Gua-temala, Honduras and Panama.

Remittances Leading Asset in Cross-border MarketThe most popular asset type that was securitized in the cross-border market was remittances, whichtotaled US$1.3 billion in 2006. Securitizations of this asset type represented 82% of total volume placedin the cross-border market (refer to Figure 6).

During 2006, a truck loan/lease securitization denominated in local currency was placed in the cross-border market by the Mexican subsidiaries of Navistar Financial Corporation. This is the first time that avehicle-related transaction is placed in the cross-border market by a Mexican issuer. Moody's rated thetwo tranches of this transaction A2 and Baa3, respectively.

Figure 52006 Latin America cross border securitization by country


Figure 62006 Latin America cross border securitization

by asset type(Total issuance US$1.7Bn)

Brazil38.7%

Argentina7.4%

Peru5.9%

Mexico8.1%

Jamaica8.9%

El Salvador31.0%

Remittances81.6%

Credit Cards3.0%

Oil Royalties7.4%

Auto loans&leases8.1%


2007 OUTLOOK

Domestic MarketsSince 2000, the domestic securitization market in Latin America has continued to grow. Moody'sexpects the domestic markets of Mexico, Brazil and Argentina to help maintain this trend in 2007.

Furthermore, Moody's expects that in 2007 MBS and MBS-related transactions will continue to repre-sent a large portion of total securitization in Latin America as a result of the growth of securitizations ofthese asset types in Mexico. Similarly, securitizations of consumer loans and auto loans are expected torepresent a high portion of total securitization in the region mainly driven by the popularity of these assettypes in Brazil and Argentina.

Bonds backed by credit-linked obligations will remain the wild card, as the size of a single deal can rangefrom US$200 million to more than US$2.0 billion. Issuance of these transactions tends to be driven byasset-liability management considerations of the financial institution selling the underlying asset.

Cross-Border MarketMoody's expects cross-border activity to remain slow in relation to domestic issuance because of thelikely continuation of favorable domestic and international market conditions for Brazilian issuers, whotraditionally issue the bulk of cross-border structured finance debt in Latin America.

COUNTRY TRANSACTION SUMMARIES

ARGENTINA

Domestic Market

2006 Issuance Summary

Argentine Domestic Market Continues its Growth

The Argentine securitization market showed another impressive year of growth in 2006 with a total issu-ance volume of US$2,550 million, representing an increase of 42% over 2005 (refer to Figure 7). Higherissuance volumes were primarily driven by another year of strong economic growth, including theincrease in consumption levels and the related availability of credit.

Figure 7Domestic Securitization in Argentina (2000-2006)

1,590

701

130 226525

1,790

2,550

0

500

1000

1500

2000

2500

3000

2000 2001 2002 2003 2004 2005 2006

Volu

me

(US$

mill

ion)


The increase is also driven by the number of new issuers and financial institutions using securitization asa source of funding. This, again, is reflected in the impressive number of more than 180 transactionsissued during the year. Although the average issuance amount per transaction increased in 2006 toUS$13.2 million from US$12.2 million in 2005, it was still low compared to other countries in Latin Amer-ica. The low amount per issuance is driven by the fact that revolving structures are not tax efficient; as aresult, one issuer may issue up to ten amortizing transactions in any given year.

Other Key Trends

Consumer and Personal Loans are the Main Asset Types

The main asset types securitized in 2006 continued to be personal and consumer loans, accounting forapproximately 44% of the total amount issued. The second-largest asset type, representing 16% of thetotal volume issued in 2006, were credit-linked notes (guaranteed loans), which are payment obligationsof the Argentine national government. Banks have gained a wide investor base by offering one of the fewinflation-linked instruments currently available in the market. Argentine and international investors alsowelcomed the first securitization that financed certain construction in the gas pipelines in the southernand northern regions of the country (Fideicomiso Financiero Gas I rated B2/A1.ar by Moody's).

Other prominent asset classes were private-label credit card receivables, future flows and, to a lesserdegree, lease-backed and mortgage-backed securities (refer to Figure 8). Most deals are still short-term;however, average maturities have been lengthened from 18 months to 20 months due to the longer termof the underlying loans.

2007 OutlookMoody's anticipates Argentina's domestic securitization activity to increase in 2007, dominated by con-sumer and personal loans. Additionally, Moody's expects an increase in MBS transactions, credit cardreceivables, and auto-loans in 2007 as origination is expected to increase accordingly. Finally, Moody'sexpects more structured finance transactions to be used for financing infrastructure projects in the coun-try.

Cross-Border Market

First Cross-Border Issuance after the Financial Crisis

During 2006, Argentina welcomed the first cross-border transaction issuance after the 2001 financial cri-sis. The deal was structured as a note issued by the Province of Neuquen for a total amount of US$125million. The province pledged certain oil royalties to a trust for the benefit of investors.

Figure 82006 Argentine Domestic Securitization by Asset Type

Private Label Credit Card

10.4%

Future Flow10.2% Credit Linked

Notes15.7%

Guaranteed BOE2.9%

Leasing6.3%

MBS3.2%

Personal Loans16.0%

Auto Loans0.1%

Credit Cards6.7%

Consumer Loans28.4%

CMBS0.1%


BRAZIL

2006 ISSUANCE SUMMARY

Domestic Market

Volume of Issuances Exceeded US$5.5 Billion

The Brazilian securitization market continued its growth trend in 2006, as volume of FIDCs2 and CRIs 3

issuance reached approximately US$5.5 billion in 2006 (refer to Figure 9). This represents a 42% growthyear-over-year. The number of securitization issuances, including CRIs, increased significantly from 60 in2005 to 127 in 2006, out of which 53 were either new FIDCs or new series of existing FIDCs that wereset up as master programs.

The increasing popularity of receivables investment funds (FIDCs) continued to drive the growth ofdomestic securitization, representing 92% of the securitization transactions registered at the BrazilianSEC in 2006. The largest five issuances represented 48% of total volume, and the largest 10 issuancesrepresented 62%. Average issuance amount was R$190 million (approximately US$88 million).

CRIs issuance volume decreased 55% in 2006 compared to 2005. However, 2005's was boosted by asingle deal which represented about half of all issuance volume. The number of CRI issuances increasedby 117% when compared to 2005, including 31 small issuances by Cibrasec (Companhia Brasileira deSecuritização). The number of CRI issuers also increased, from 8 in 2005 to 18 in 2006, driven by newentrants in the market or by old players creating new companies. The number of CMBS deals repre-sented about 60% of volume of CRIs issued during 2006. CMBS deals included not only built-to-suittransactions but also sale-and-lease-back arrangements.

In general terms, the underlying assets backing securitizations continue to be diversified (refer to Figure10). The exception in 2006 was the large concentration of volume in auto loans, which representedabout 39% of total volume. However, this was mainly concentrated in the two FIDCs set up by Votoran-tim Group's BV Financeira, which tapped the securitization market for the first time. Aggregate issuancevolume of these two FIDCs was US$1.7 billion and represented about 80% of the total auto loans secu-ritization volume. One of the FIDCs established by BV Financeira was an open-ended fund, which allowssenior investors to redeem shares on a daily basis, illustrating the increasing level of sophistication in themarket in order to meet investors' evolving demands.

2 FIDCs are receivables investment funds (Fundos de Investimentos em Dereitos Creditórios).3 CRIs are certificates backed by real estate (Certificados de Recebíveis Imobiliários).

Figure 9Domestic Securitization in Brazil (2000-2006)

184 88 106

1,0311,652

3,911

5,542

0

1000

2000

3000

4000

5000

6000

2000 2001 2002 2003 2004 2005 2006

Volu

me

(US$

mill

ion)


Consumer loans continued to be a popular asset class, representing about 16% of total volume, as didtrade receivables, with a 12% share. Issuers of payroll-deductible loans securitizations included familiarnames such as Banco Cruzeiro do Sul, with its FIDC BCSul Verax II and BMG with its new BMG FIDC V.On the trade receivables side, Grupo Brasil's FIDC was a good example of a company that found in theFIDCs a less expensive working capital source as compared to the traditional short term banking trans-actions.

Future flow receivables were also an asset type that continued to be a sizable participant in the marketwith 13% share, including a new type of transaction that securitized oil royalties. Another asset type wasthe corporate loan obligations, represented this year by a US$413 million issuance by CEMIG FIDCConta CRC with the full co-obligation of Cemig, the State of Minas Gerais' energy company.

The Effect of Benchmark Interest Rate Cuts Was a Positive Factor

During 2006 the Brazilian Central Bank made consistent reductions to the benchmark interest rate to13.25% in November 2006 from 17.25%, in January 2006, significantly reducing the return that investorsearn on Government Treasury Bonds. As a result, investors looked more closely at non-governmentissuances to diversify their investment options and maximize portfolio returns, which is an important con-tributor to the continuing growth trend in the securitization markets.

The vast majority of the FIDCs pay senior investors a return based on a premium over the Brazilian CDI,which is directly linked to the benchmark interest rate. As a result, past issuers benefited from the ratecuts while new issuers most likely found the rate reduction to be an incentive to tap the domestic capitalmarkets for the first time. However, premiums over the CDI have not varied significantly from deal to deal,with the one exception of the open-ended fund of BV Financeira, paying 101% of the CDI.

CROSS-BORDER MARKET

Issuance Continues to DeclineBrazilian issuers accounted for 39% of total issuance in the Latin American cross-border market in 2006compared to 49% in 2005. The aggregate issuance of US$655 million represented a decrease of 43%from 2005 (refer to Figure 11). The market followed a similar trend from 2004 to 2005. The continuingdecline of cross-border securitization from Brazilian issuers can be attributed to the continued favorableeconomic environment in the last three years, access to the local and international capital markets on anunsecured basis, and high commodity prices.

Figure 102006 Brazilian Domestic Securitization by Asset Type

Trade Receivables12.3%

Auto Loans38.5%

Consumer Loans16.2%

Future Flow12.6%

Personal Loans1.2%

Other11.0%

MBS8.2%


Brazilian Issuers Focused on Prepaying or Refinancing Existing DebtFrequent issuers of structured finance bonds focused their efforts to prepay or to refinance existing debt.This phenomenon can be attributed to the existence of higher commodity prices across industries trans-lating into higher cash flows and to the ability of issuers to obtain financing at better rates than thoseoffered by the structured finance markets. Some issuers prepaid their old DPR securitizations and re-issued at more attractive rates and tenors. This has been a trend in the Brazilian market since 2005.

DPRs Was the Only Asset Type SecuritizedDuring 2007, remittances, or diversified payment rights (DPRs), has been the only asset class securitizedin the cross-border market by Brazilian issuers such as Banco Itaú, Unibanco and HSBC Brazil. HSBCBrazil, a new issuer of cross-border bonds backed by future remittances, closed a $200 million transac-tion, rated Aaa based on the financial guaranty provided by Financial Guaranty Insurance Corporation(FGIC, Insurance Financial Strength rating of Aaa).

Export receivables transactions and political risk insurance bonds by Brazilian entities were notablyabsent in 2006. The high liquidity levels in the market, the declining spreads of Brazilian sovereign riskduring the year, and the existence of other financing sources did not make these types of structures asattractive as in the past.

2007 OutlookMoody's expects more issuances of FIDCs with a higher number of transactions and higher volume sizeduring 2007. The number of intermediaries might increase as foreign banking institutions hire profession-als to further develop or start up asset-backed operations in Brazil, because they perceive Brazil as apromising market.

Trade receivables, personal loans, future flows and auto loans will continue to be the main asset classessecuritized. In addition, new asset classes as well as more complex structures may come into the marketas Brazilian intermediaries get more specialized in the securitization arena.

Real estate-backed deals may experience growth as the real estate market overall seems to haveentered into a positive cycle, with seven local companies placing IPOs in 2006 and foreign players thatcame into the market through joint ventures or direct investments. Transactions backed by single tenantshall continue to be an important source of funds for investments in new industrial and commercialprojects, the so-called built-to-suit transactions, as well as for sale-and-lease-back deals.

Figure 11Cross Border Securitizations from Brazilian Issuers (2000-2006)

679

4,200

2,8002,140

1,145655

5,301

-

1,000

2,000

3,000

4,000

5,000

6,000

2000 2001 2002 2003 2004 2005 2006

Volu

me

(US$

mill

ion)


Moody's also believes that the current level of the benchmark interest rate, which might continue to bereduced during 2007, will positively impact the portfolio managers' interest in investing in non-govern-ment issuances. Therefore, to maximize portfolio returns, investors may look at corporate and securitiza-tion bonds, including FIDCs and CRIs, as alternative investments.

Moody's expects to continue to see declining issuance volumes in the cross-border markets in 2007 asa result of favorable economic conditions in Brazil.

CHILE

Domestic MarketSecuritization volume in the local Chilean market was $325 million in 2006 (refer to Figure 12), a reduc-tion of 63% compared to 2005. This decrease is partially explained by the sharp increase of 2005 vol-ume due to a few securitizations to finance infrastructure projects.

The Chilean local market was severely affected by some defaulting transactions in 2004 after a dramaticincrease in prepayment levels. Also, Chilean banks have the ability to issue collateralized debt backed bymortgages, without true sale of the related assets. This mechanism of financing has limited the origina-tors' desire for MBS issuances in the market.

In terms of asset types, the Chilean market has shown an interesting variety of underlying assets, suchas credit cards, mortgages, personal loans, trade receivables and auto loans. Credit cards and personalloans represented 28% and 24%, respectively (refer to Figure 13).

Figure 12Domestic Securitization in Chile (2000-2006)

Figure 132006 Chilean Domestic Securitization by Asset Type

173 220

430 380293

873

325

-100200300400500600700800900

1,000

2000 2001 2002 2003 2004 2005 2006

Volu

me

(US$

mill

ion)

Auto Loans12.2%

Credit Cards27.9%

MBS2.8%


Personal Loans23.7%

Other22.8%


2007 OutlookMoody's does not expect higher securitization activity in Chile for the next year.

COLOMBIA


Domestic MarketTotal domestic issuance of US$674 million in 2006 increased by 109% from US$323 million in 2005 (Fig-ure 14). In 2006, the size of the local securitization market was once again dictated by the level of activ-ity from Titularizadora Colombiana.4 The year-over-year increase was mainly driven by the issuance ofthree large mortgage backed transactions. In 2006, Colombia experienced significant developments inthe mortgage markets as interest rates decreased and new mortgage products were introduced.

As in previous years, the largest issuer in the domestic market was Titularizadora Colombiana (theColombian equivalent of Fannie Mae), which issued the only three mortgage-backed deals in the market.The MBS transactions accounted for 96% of the total volume of issuances for 2006, and are backedmainly by social-interest mortgages (subsidized, low-income loans) as well as non-social interest mort-gages. For the first time Titularizadora Colombiana issued bonds backed by fixed-rate mortgage loans inpesos. To date, Titularizadora has issued bonds denominated in UVRs - an inflation-indexed currencyunit. The remainder 4% was comprised of a single securitization of future flows originated by a pool ofhealthcare clinics.

2007 OutlookIn the domestic market, Moody's expects continued issuances of MBS, given the 2006's favorabledevelopments in mortgage products, as well as limited issuance of small ABS transactions. Mortgagebacked securitizations from Titularizadora Colombiana should continue to flow at a rate of two to threetransactions per year, as has been the case in recent years.

Despite the fact that Colombia's credit outlook has improved in line with strengthening economic andsecurity-related conditions (which are factors that have led to a more favorable attitude on the part of for-eign investors), prospects for cross-border issuance during 2007 remain relatively limited. Local compa-nies' access to the international capital markets continues to be supported by the government'swillingness and ability to preserve the necessary conditions to assure a stable economic and politicalenvironment. Moody's does not anticipate any issuance of cross-border transactions in 2007.

4 Titularizadora Colombiana, a private entity, is the largest MBS issuer in Colombia.

Figure 14Domestic Securitization in Colombia (2000-2006)

55 63

597510

799

323

674

-

200

400

600

800

1,000

2000 2001 2002 2003 2004 2005 2006

Volu

me

(US$

mill

ion)


COSTA RICA

Domestic MarketIn 2006 a US$50 million credit-linked issuance from Barclays Bank was the sole securitization in CostaRica's domestic market. This transaction is backed by obligations from the National Bank of Costa Rica.

2007 OutlookIn the domestic market, Moody's expects little activity from Costa Rican issuers in 2007.

EL SALVADOR

Cross-Border MarketSalvadorian entities' securitization activity in the 2006 cross-border market amounted to US$525 million.Repeat issuers amended and restated existing transactions backed by future remittance flows, or issuednew ones. Unlike prior transactions originated by these issuers, the notes did not benefit from financialguarantees.

2007 OutlookMoody's expects limited participation of Salvadorian entities in the cross-border securitizations market in2007.

JAMAICA

Cross-Border MarketThe first cross-border securitization of future remittance flows from Jamaica came to market in 2006 byNational Commercial Bank of Jamaica (NCB Jamaica), one of the two largest banks in Jamaica. Itshould be noted that NCB Jamaica is not a stranger to the securitization arena; as it had securitizedfuture receivables backed by credit card vouchers. In 2006, NCB Jamaica issued a $100 million seriesof notes backed by remittance receivables from its Jamaica Diversified Payment Rights Program. Theassets consist of U.S. dollar electronic remittances sent by customers outside of Jamaica to beneficia-ries in Jamaica that are processed by the bank. The Series 2006-1 was rated Baa3 by Moody's. Addi-tionally, NCB Jamaica issued $50 million of notes under its credit card voucher program, JamaicanCredit Card Receivables Master Trust, during 2006.

2007 OutlookMoody's expects minimal or no activity from Jamaican issuers in the cross-border market during 2007.

MEXICO


Domestic MarketMexico's 2006 total domestic issuance of approximately US$4.4 billion represented 33% of Latin Amer-ica's total domestic issuance. Total domestic volume issued in 2006 decreased by 9% compared to2005 as a result of lower securitization levels in credit-linked obligations (refer to Figure 15). This reduc-tion was driven by the lack of IPAB5 transactions during the year. Nevertheless, if we were to compare2006 total domestic issuances in Mexico without any IPAB transaction in 2005, the domestic securitiza-

5 IPAB (Instituto para la Protección al Ahorro Bancario) is the Mexican government deposit insurance agency.


tion market in 2006 would have shown a 100% growth year-over-year, reflecting a real growth in numberof securitizations and the consolidation of securitization as a viable financing alternative in the Mexicanmarket.

MBS transactions closed in 2006 increased substantially to US$1,700 million compared to US$561 mil-lion in 2005. In addition to repeat issuers such as Infonavit, Metrofinanciera, Hipotecaria Su Casita, andGMAC, new participants such as Patrimonio, Hipotecaria Comercial América, Fincasa Hipotecaria,Hipotecaria Crédito y Casa and Banorte issued securities in the local MBS market. Infonavit’s issuancesaccounted for 32% of total MBS transaction volume closed during the year.

As observed in Figure 16, real estate-related deals (MBS and take-out securitizations) represented 47%of the volume issued in the local securitization market in 2006.

As shown above, MBS transactions alone represented 38% of total volume issued. Structures related tothis type of asset included transactions with partial credit guarantees, financial guarantees from monolineinsurers, mezzanine structures and the inclusion of co-financed loans6 into securitizations.

For the first time, a Mexican bank closed a transaction in the local market backed by mortgage loansfrom its portfolio. Banorte issued certificates backed by a pool of residential mortgages for approxi-mately US$186 million. Moody's rated the Class A certificates Aaa.mx (Mexican National Scale) andBaa1 (Global Scale, Local Currency).

Figure 15Domestic Securitization in Mexico (2000-2006)

Figure 162006 Mexican Domestic Securitization by Asset Type

6 Co-financed loans are mortgage loans granted by Infonavit together with a bank or a sofol (non-bank banks) to a single borrower in which both lenders share the lien on the financed property.

65 427 414 6042,213

4,430

4,098 2,633

1,3460

1000

2000

3000

4000

5000

6000

2000 2001 2002 2003 2004 2005 2006

Volu

me

(US$

mill

ion)

Others IPAB transactions

Take-out9.2% Trade Receivables

8.2%Auto Loans

0.4%

Consumer Loans7.6%

Credit Cards5.1%

Personal Loans2.6%

MBS38.0%

Credit Linked Notes29.0%


Additionally, in an effort to increase standardization in the MBS domestic market, Sociedad HipotecariaFederal launched the Borhis Fungibles program. Two transactions closed in 2006 under this program.Transactions issued under the Borhis Fungibles program generally allow for pre-funding of receivables upto a certain percentage of the issuance amount. In addition, these transactions could be subject to sub-sequent re-openings to issue additional certificates, which are similar to those already issued.

Transactions secured by construction take-out loans in the domestic market in 2006 were US$407 mil-lion compared to US$251 million in 2005. In addition to the real estate transactions, other assets, suchas credit linked notes, trade receivables, and consumer loans, were securitized. Credit linked notes rep-resented 29% of total volume issued in the domestic market during the year and are related to transac-tions from Comisión Federal de Electricidad (credit rights), Banorte (UMS bonds7), and Banamex (UMSbonds).

Cross-Border Market Only one US$136 million cross-border transaction closed during 2006 compared to US$310 million in2005. Arrendadora Financiera Navistar and Servicios Financieros Navistar, subsidiaries of NavistarFinancial Corporation, issued two series of Euro-Peso Notes backed by truck loans and financial leasesdenominated in local currency, which Moody's rated A2 (Class A notes) and Baa3 (Class B notes).

2007 Outlook In Mexico's domestic market, Moody's expects that securitizations of mortgage-backed securities andconstruction loans to increase during 2007. We expect that the repeat issuers will continue to dominateMBS issuance, and that other Mexican banks may follow Banorte's lead and start to securitize theirmortgage portfolios in 2007. Moody's anticipates that during 2007, securitizations of different assettypes such as leases, vehicle loans and leases, personal loans, and CMBS will be placed into thedomestic market.

Sociedad Hipotecaria Federal (SHF) plans to stop funding mortgages directly in 2009 and to focus onproviding financial guarantees, such as partial credit guarantees and mortgage insurance. Because ofthis, Moody's anticipates that the market is headed to a further standardization of mortgage originationguidelines, which in turn should contribute to greater liquidity in the market. This anticipated standardiza-tion will allow Sofoles8 to eventually pool their mortgages to issue MBS collectively. In addition, Sofolesare likely to continue to seek additional funding mechanisms such as warehouse lines to fund mort-gages.

Moody's believes that the Mexican housing market will likely remain an attractive space for internationalplayers as more financial insurance companies enter into this market.

In 2007 Moody's expects to see at least one securitization backed by existing assets.

PERU

Domestic MarketDomestic securitization activity in Peru slowed down dramatically in election year 2006 and closed atUS$71 million (refer to Figure 17). This represents a 75% decline from significant growth in 2005 thatreached $295 million.

7 UMS bonds are bonds from the Mexican government denominated in US dollars.8 Sofoles (Sociedades Financieras de Objeto Limitado) are special-purpose non-banking financial institutions.


Only repeat issuers Financiera CMR (private label credit cards), Supermercados Wong and Metro (futuresales), and Continental Sociedad Titulizadora (credit-linked notes) came to market in 2006. Credit-linkednotes accounted for 70% of the total domestic securitizations in Peru during 2006 (see Figure 18).

Cross-Border MarketIn 2006, Banco de Crédito del Perú issued one series of notes for US$100 million out of its CCR Inc. MT-100 Payment Rights Master Trust program. The notes are backed by diversified payment rights (DPRs)resulting from U.S. dollar remittances sent by customers outside of Peru to beneficiaries in Peru pro-cessed by the bank. Moody's rated the deal Aaa based on the wrap by Ambac Assurance Corp (ratedAaa - Insurance Financial Strength).

2007 OutlookMoody's expects little activity from Peruvian entities in the cross-border market during 2007. Local mar-ket, however, is expected to regain some traction, with approximately five to ten issuances for 2007.Moody's expects some securitization activity in the MBS arena in the foreseeable future, based on thegrowing portfolio of social-interest mortgages under the government-sponsored MIVIVIENDA Programheld by commercial banks.

In addition, the International Finance Company (IFC) is collaborating with Banco de Crédito del Perú toset up Peru's first secondary mortgage market company, Titularizadora Peruana. According to IFC, Tit-ularizadora Peruana will acquire residential mortgage loans and structure mortgage-backed securities todevelop the secondary mortgage market and expand access to housing finance in Peru.

Figure 17Domestic Securitization in Peru (2000-2006)

Figure 182006 Peruvian Domestic Securitization by Asset Type

37

94

7

60

163

295

71

0

50

100

150

200

250

300

350

2000 2001 2002 2003 2004 2005 2006

Volu

me

(US$

mill

ion)


Other8.6%

Credit Linked Notes70.1%

Credit Cards8.5%


APPENDIX

2006 Latin American Structured Finance Transactions Rated By Moody's

Country Deal Name Originating Company Asset TypeAmount

(millions) Closing Moody's ratingArgentina Fideicomiso Financiero

Credipaz Serie IFideicomiso Financiero Cre-dipaz Serie I

Credit Cards USD 3 Jan-06 A2.ar (class A), Baa2.ar (Class

B)/B3Argentina Fideicomiso Financiero

Multipyme IFideicomiso Financiero Mul-tipyme I

Guaranteed BOE

USD 4 Jan-06 B1/Aa3.ar

Argentina Fideicomiso Financiero Supervielle Préstamos Garantizados II

FF Supervielle Prestamos Garantizados II

Credit-linked notes

USD 28 Jan-06 B3/A3.ar

Argentina Fideicomiso Financiero SECUPYME XVIII

Fideicomiso Financiero SECUPYME XVIII

Guaranteed BOE

USD 4 Feb-06 B1/Aa3.ar

Argentina Fideicomiso Financiero Banex Creditos XI

Fideicomiso Financiero Banex Creditos XI

Personal loans

USD 18 Feb-06 Ba2/Aaa.ar (Class A), B1/Aa3.ar (Class

B), Caa1/Ba1.ar (Class C)

Argentina Fideicomiso Financiero Tarjeta Privada II

Fideicomiso Financiero Tar-jeta Privada II

Credit Cards USD 8 Mar-06 B1/Aa2.ar

Argentina Fideicomiso Financiero Montemar III

Fideicomiso Financiero Mon-temar III

Personal loans

USD 4 Apr-06 B2/Aa3.ar (Class A), B3/Baa2.ar (Class

B)Argentina Fideicomiso Financiero

Tarjeta Privada IIIFideicomiso Financiero Tar-jeta Privada III

Credit Cards USD 8 May-06 B1/Aa2.ar

Argentina Fideicomiso Financiero Aval Rural II

Fideicomiso Financiero Aval Rural II

Guaranteed BOE

USD 3 Jun-06 B2/A1.ar

Argentina Fideicomiso Financiero Banex Creditos XII

Fidecomiso Financiero Banex Creditos XII

Consumer Loans

USD 15 Jun-06 Ba2/Aaa.ar (Class A), Ba2/Aaa.ar (Class


Argentina Fideicomiso Financiero Multipyme II

Fideicomiso Financiero Mul-tipyme II

Guaranteed BOE

USD 4 Jun-06 B1/Aa3.ar

Argentina Fideicomiso Financiero Secupyme XIX

Fideicomiso Financiero Secupyme XIX

Guaranteed BOE

USD 3 Jul-06 B1/Aa3.ar

Argentina Fideicomiso Financiero Supervielle Personales I

Fideicomiso Financiero Supervielle Personales I

Personal loans

USD 9 Jul-06 Ba2/Aaa.ar (Class A), B1/

Aa2.ar (Class B)Argentina Fideicomiso Financiero

Supervielle Leasing IFideicomiso Financiero Supervielle Leasing I

Leases-Equipment

USD 23 Aug-06 Ba2/Aaa.ar (Class A), Ba2/Aaa.ar (Class B), B1/Aa2.ar

(Class C)Argentina Fideicomiso Financiero

Tarjeta Privada IVFideicomiso Financiero Tar-jeta Privada IV

Credit Cards USD 10 Sep-06 B1/Aa2.ar

Argentina Fideicomiso Financiero SECUPYME XX

Fideicomiso Financiero SECUPYME XX

Guaranteed BOE

USD 6 Sep-06 B1/Aa3.ar

Argentina Fideicomiso Financiero Aval Rural III

Fideicomiso Financiero Aval Rural III

Guaranteed BOE

USD 8 Sep-06 B2/A1.ar

Argentina Fideicomiso Financiero Banex Creditos XIII

Fideicomiso Financiero Banex Creditos XIII

Personal loans

USD 16 Sep-06 Ba2/Aaa.ar (Class A), Ba2/Aaa.ar (Class


Argentina Fideicomiso Financiero SECUPYME XXI

Fideicomiso Financiero SECUPYME XXI

Guaranteed BOE

USD 5 Nov-06 B1/Aa3.ar


Argentina Fideicomiso Financiero Supervielle Personales II

Supervielle Personales II Personal loans

USD 10 Nov-06 Ba2/Aaa.ar (Class A), B1/


Supervielle Leasing IIFideicomiso Financiero Supervielle Leasing II

Leases-Equipment

USD 13 Nov-06 Ba2/Aaa.ar (Class A), B1/


SECUPYME XXIIFideicomiso Financiero SECUPYME XXII

Guaranteed BOE

USD 4 Nov-06 B1/Aa3.ar

Argentina Fideicomiso Financiero Tarjeta Privada V

Fideicomiso Financiero Tar-jeta Privada V

Credit Cards USD 10 Dec-06 B1/Aa2.ar

Argentina Fideicomiso Financiero Rio Personales I

Fideicomiso Financiero Rio Personales I

Personal loans

USD 46 Dec-06 Ba1/Aaa.ar

Argentina Fideicomiso Financiero Banex Creditos XIV

Fideicomiso Financiero Banex Creditos XIV

Personal loans

USD 17 Dec-06 Ba2/Aaa.ar (Class A), Ba2/Aaa.ar (Class


Argentina Fideicomiso Financiero Gas I

Fideicomiso Financiero Gas I Future flow USD 193 Dec-06 B2/A1.ar

Argentina Fideicomiso Financiero SECUPYME XXIII

Fideicomiso Financiero SECUPYME XXIII

Guaranteed BOE

USD 4 Dec-06 B1/Aa3.ar

Brazil UBB Diversified Pay-ment Rights Finance Company, Series 2002-1 (Amended and Restated as of January 17, 2006)

Unibanco-Uniao de Bancos Brasileiros

Future Receivables

USD 105 Jan-06 Baa1

Brazil FIDC BCSUL VERAX II - SERIES 2005-2

FIDC BCSUL VERAX CREDITO CONSIGNADO II

Consumer Loans

R$ 113 Jan-06 Baa2/Aaa.br

Brazil Brazilian Securities Series 2005-36

Brazilian Securities Co. Securitizadora S.A.

MBS R$ 7 Feb-06 Ba3/A2.br

Brazil HSBC Brazil DPR Finance (No. 1) Limited, Series 2006-A

HSBC Brazil DPR Finance (No. 1) Ltd.

Future Receivables

USD 200 Mar-06 Aaa



MBS R$ 9 Mar-06 Ba3/A2.br



MBS R$ 7 Mar-06 Baa3/Aaa.br

Brazil FIDC Grupo Brasil 2006-1

GRUPO BRAZIL Trade Receivables

R$ 85 Apr-06 Baa3/Aaa.br

Brazil BV Financeira - FIDC I BV Financeira - FIDC I Auto loans R$ 500 Jun-06 Baa2/Aaa.brBrazil Fundo Bonsucesso -

Series 2006-1Fundo Bonsucesso de Inv. em Direitos Cr.

Consumer Loans

R$ 80 Jul-06 Baa2/Aaa.br

Brazil BMG FIDC V - Series 2006-1

BMG FIDC - V Personal loans


Brazil BV FIDC II BV Financeira FIDC II Leases-Vehicles

R$ 1000 Jul-06 (P)Baa1/(P)Aaa.br

(senior shares) (P)Caa1/

(P)B3.br (sub shares)

Brazil FIDC BCSUL VERAX II - SERIES 2006-1

FIDC BCSUL VERAX CREDITO CONSIGNADO II

Consumer Loans


Brazil FIDC BMC PREMIUM - VEHICULOS - Series 2006-1

FIDC BMC PREMIUM - VEIC-ULOS

Leases-Vehicles

R$ 100 Sep-06 Baa3/Aaa.br

2006 Latin American Structured Finance Transactions Rated By Moody's (Continued)


(millions) Closing Moody's rating


Brazil Banco Itaú´s Electronic Remittance Backed Notes 2006-1 Amended - Restated

Banco Itaú Future Receivables

USD 200 Sep-06 Baa1

Brazil FIDC BMC I - Credito Consignado - Series 2006-1

FIDC BMC I - Credito Consig-nado - Series 2006-1

Consumer Loans

R$ 100 Dec-06 (P)Baa3/(P)Aaa.br

Brazil BMG FIDC VI BMG FIDC - VI Personal loans

R$ 208 Dec-06 (P) Baa3/(P) Aaa.br

Brazil FIDC BGNPREMIUM I, Series 2006-1

FIDC BGNPremium I Consumer Loans

R$ 150 Dec-06 (P)Baa3/(P)Aaa.br

Brazil CPTM FIDC Fundo de Investimento em Direitos Creditórios CPTM

Future Receivables

R$ 150 Dec-06 (P)Ba2/(P)Aa3.br

Jamaica Jamaica Diversified Pay-ment Rights Company, Series 2006-1

Jamaica Diversified Payment Rights Co.

Future Receivables

USD 100 Mar-06 Baa3

Mexico BRHSCCB P06 Hipotecaria Su Casita, S.A. de C.V.

MBS MXP 525 Apr-06 Baa1/Aaa.mx

Mexico BNORT CB06-2 Banco Mercantil del Norte, S.A.

Credit-linked notes

MXP 1142 Jun-06 Baa1/Aaa.mx

Mexico BNORT CB06 Banco Mercantil del Norte, S.A.

Credit-linked notes

MXP 3769 Jun-06 Baa1/Aaa.mx

Mexico BNORCB 06 Banco Mercantil del Norte, S.A.

MBS MXP 1985 Dec-06 Baa1/Aaa.mx

Mexico CICB 06 Series A Crédito Inmobiliario, S.A. de C.V.

Take-out MXP 658 Dec-06 Aaa/Aaa.mx

Mexico MXMACCB 06U GMAC Financiera S.A. de C.V. MBS UDI 143 Mar-06 Baa1/Aaa.mxMexico MXMACFW 06U GMAC Financiera, S.A. de

C.V. SOFOLMBS UDI 178 Oct-06 Aaa/Aaa.mx

Mexico MXMACFW 06-2U GMAC Financiera, S.A. de C.V. SOFOL

MBS UDI 16 Oct-06 Ba1/A1.mx

Mexico HICOACB 06-U Hipotecaria Comercial Amer-ica, S.A. de C.V.

MBS UDI 168 Sep-06 Baa1/Aaa.mx

Mexico CREYCB 06U Hipotecaria Credito Y Casa MBS UDI 430 Dec-06 Baa1/Aaa.mxMexico CREYCB 06-2U Hipotecaria Credito Y Casa MBS UDI 48 Dec-06 Ba2/A1.mxMexico BRHSCCB U06 Hipotecaria Su Casita, S.A.

de C.V.MBS UDI 270 Jun-06 Baa1/Aaa.mx

Mexico BRHSCCB 06-3U Hipotecaria Su Casita, S.A. de C.V.

MBS UDI 252 Aug-06 Baa1/Aaa.mx


MBS UDI 28 Aug-06 Ba2/A2.mx


MBS UDI 195 Aug-06 Baa1/Aaa.mx


MBS UDI 22 Aug-06 Ba2/A2.mx

Mexico HSCCB 06 Series A Hipotecaria Su Casita, S.A. de C.V.

Take-out MXP 875 Sep-06 Aaa/Aaa.mx

Mexico BRHSCCB 06-2 Hipotecaria Su Casita, S.A. de C.V.

MBS MXP 622 Nov-06 Baa1/Aaa.mx

Mexico CEDEVIS 06-2U Infonavit MBS UDI 273 Jun-06 Baa1/Aaa.mxMexico CEDEVIS 06-4U Infonavit MBS UDI 597 Nov-06 Baa1/Aaa.mxMexico METROCB 06U Metrofinanciera, S.A. de C.V. MBS UDI 134 Jun-06 Baa1/Aaa.mxMexico MTROCB 06U Metrofinanciera, S.A. de C.V. MBS UDI 295 Sep-06 Baa1/Aaa.mxMexico PATRICB 06U Patrimonio S.A. de C.V. MBS UDI 263 Dec-06 Aaa/Aaa.mx





Upgrades & Reviews for Upgrade

Upgrades

Mexico SFN - AFN 8.44% Euro-Peso Notes Class A

Servicios Financieros Navistar - Arrendadora Fin-anciera Navistar

Truck Loans - Lease Agreements

MX$1,263 Dec-06 A2

Mexico SFN - AFN 9.27% Euro-Peso Notes Class B

Servicios Financieros Navistar - Arrendadora Fin-anciera Navistar

Truck Loans - Lease Agreements

MX$237 Dec-06 Baa3

Peru CCR Inc. MIT-100 Pay-ment Right Master Trust, Series 2006-A

CCR Inc. MT-100 Payment Rights Master Trust

Future Receivables

USD 100 Mar-06 Aaa

2006 Latin American Structured Finance Upgrades/downgrades Date Country Deal Name Action From To01/23/2006 Argentina Fideicomiso Financiero Banex Créditos VI (Class C) Upgrade Caa2/B1.ar Caa1/Ba1.ar01/23/2006 Argentina Fideicomiso Financiero Banex Créditos VII (Class A) Upgrade B3/A2.ar B1/Aa3.ar01/23/2006 Argentina Fideicomiso Financiero Banex Créditos VII (Class B) Upgrade Caa2/B1.ar Caa1/Ba1.ar01/23/2006 Argentina Fideicomiso Financiero Banex Créditos VIII (Class A) Upgrade B1/Aa2.ar Ba2/Aaa.ar01/23/2006 Argentina Fideicomiso Financiero Banex Créditos VIII (Class B) Upgrade B3/A2.ar B1/Aa3.ar01/23/2006 Argentina Fideicomiso Financiero Banex Créditos VIII (Class C) Upgrade Caa2/B1.ar Caa1/Ba1.ar01/23/2006 Argentina Fideicomiso Financiero Banex Créditos IX (Class A) Upgrade B1/Aa2.ar Ba2/Aaa.ar01/23/2006 Argentina Fideicomiso Financiero Banex Créditos IX (Class B) Upgrade B3/A2.ar B1/Aa3.ar01/23/2006 Argentina Fideicomiso Financiero Banex Créditos IX (Class C) Upgrade Caa2/B1.ar Caa1/Ba1.ar01/23/2006 Argentina Fideicomiso Financiero Banex Créditos X (Class A) Upgrade B1/Aa2.ar Ba2/Aaa.ar01/23/2006 Argentina Fideicomiso Financiero Banex Créditos X (Class B) Upgrade B3/A2.ar B1/Aa3.ar01/23/2006 Argentina Fideicomiso Financiero Banex Créditos X (Class C) Upgrade Caa2/B1.ar Caa1/Ba1.ar07/28/2006 Argentina Fideicomiso Financiero Multipyme I Upgrade B1/A1.ar B1/Aa3.ar07/28/2006 Argentina Fideicomiso Financiero Secupyme XIV Upgrade B1/A1.ar B1/Aa3.ar07/28/2006 Argentina Fideicomiso Financiero Secupyme XV Upgrade B1/A1.ar B1/Aa3.ar07/28/2006 Argentina Fideicomiso Financiero Secupyme XVI Upgrade B1/A1.ar B1/Aa3.ar07/28/2006 Argentina Fideicomiso Financiero Secupyme XVII Upgrade B1/A1.ar B1/Aa3.ar07/28/2006 Argentina Fideicomiso Financiero Secupyme XVIII Upgrade B1/A1.ar B1/Aa3.ar07/05/2006 Brazil FURNAS I FIDC Upgrade Ba2/Aa3.br Ba1/Aa1.br07/05/2006 Brazil FURNAS II FIDC Upgrade Ba2/Aa3.br Ba1/Aa1.br09/13/2006 Brazil FIDC BGNPREMIUM I - Series2004-1 Upgrade Ba2/Aa2.br Baa3/Aaa.br09/13/2006 Brazil FIDC BGNPREMIUM I - Series2004-2 Upgrade Ba2/Aa2.br Baa3/Aaa.br09/13/2006 Brazil FIDC BGNPREMIUM I - Series2005-1 Upgrade Ba2/Aa2.br Baa3/Aaa.br09/13/2006 Brazil FIDC BCSUL VERAX II - Series 2005-1 Upgrade Baa3 Baa209/13/2006 Brazil FIDC BCSUL VERAX II - Series 2005-2 Upgrade Baa3 Baa209/13/2006 Brazil FIDC BCSUL VERAX II - Series 2006-1 Upgrade (P)Baa3 (P)Baa209/13/2006 Brazil FIDC BGN LIFE - Series 2005-1 Upgrade Baa3 Baa209/13/2006 Brazil FIDC BGN LIFE - Series 2005-2 Upgrade Baa3 Baa201/10/2006 Brazil PB Special Trust 2001 P15 Upgrade Baa1 A201/10/2006 Brazil PB Special Trust 2001 P32 Upgrade Baa1 A201/10/2006 Brazil Petrobrás International Finance Co. 9.875% Senior

Notes 2008Upgrade Baa1 A2

01/10/2006 Brazil Petrobrás International Finance Co. 9.75% Senior Notes 2011

Upgrade Baa1 A2

01/10/2006 Brazil Petrobrás International Finance Co. 9.125% Senior Notes 2007

Upgrade Baa1 A2

09/21/2006 Brazil Banco Itaú- Bahamas Branch 10.375% Step Up Subor-dinated Callable Notes 2012

Upgrade Baa1 A2





Downgrades & Reviews for Downgrade

Downgrades

Reviews for Downgrade

09/21/2006 Brazil Banco Bradesco Grand Cayman Branch 10.25% Subor-dinated Notes 2011

Upgrade Baa1 A2

09/21/2006 Brazil Banco Bradesco Grand Cayman Branch 4.05% Subordi-nated Notes 2012

Upgrade Baa1 A2


Upgrade Baa1 A2


Upgrade Baa1 A2

09/21/2006 Brazil Banco Brasil Grand Cayman Branch 8.5% Subordinated Notes 2014

Upgrade Baa1 A2

09/21/2006 Brazil Banco Itaú Grand Cayman Branch 10.00% Subordi-nated Notes 2011

Upgrade Baa1 A2

09/21/2006 Brazil Banco Itaú Grand Cayman Branch 4.25% Subordinated Notes 2011

Upgrade Baa1 A2

09/21/2006 Brazil Unibanco Grand Cayman Branch 9.375% Step up Subor-dinated Callable Notes 2012

Upgrade Baa1 A2

09/21/2006 Brazil Unibanco Grand Cayman Branch Step up Subordinated Callable Notes 2013

Upgrade Baa1 A2

11/20/2006 Brazil Brazil Development Funding Corporation Secured Notes 2011

Upgrade A3 A1

11/16/2006 Brazil Ambev Senior Notes Due 2011 Upgrade Baa3 Baa111/16/2006 Brazil Ambev Senior Notes Due 2013 Upgrade Baa3 Baa1

Date Country Deal Name Action From To05/26/2006 Brazil Brasil Telecom Structured Notes 2014 Downgrade Baa3 Ba106/02/2006 Brazil PB Special Trust 2001 Due 2011 Downgrade A2 Baa207/06/2006 Brazil Brazil Securities Series 2002-2 Downgrade Baa3/Aa1.br B1/ Baa1.br10/27/2006 Brazil CVRD Finance Ltd. Series 2000-1 Downgrade Baa1 Baa310/27/2006 Brazil CVRD Finance Ltd. Series 2000-3 Downgrade Baa1 Baa310/27/2006 Brazil Vale Overseas Limited Enhanced Guaranteed Notes 2007 Downgrade Baa1 Baa3

Date Country Deal Name Action Current Rating07/06/2006 Brazil Brazil Securities Series 2001-3 Review Baa3/Aa1.br07/06/2006 Brazil Brazil Securities Series 2002-1 Review Baa3/Aa1.br07/06/2006 Mexico Metro Financiera Cross- Border Series 2005-2 Review Baa1

2006 Latin American Structured Finance Upgrades/downgrades (Continued)Date Country Deal Name Action From To


Doc ID# SF90204

© Copyright 2007, Moody’s Investors Service, Inc. and/or its licensors and affiliates including Moody’s Assurance Company, Inc. (together, "MOODY’S"). All rights reserved. ALL INFORMATIONCONTAINED HEREIN IS PROTECTED BY COPYRIGHT LAW AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED,TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANYMEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT. All information contained herein is obtained by MOODY’S from sources believed by it to be accurate andreliable. Because of the possibility of human or mechanical error as well as other factors, however, such information is provided “as is” without warranty of any kind and MOODY’S, in particular,makes no representation or warranty, express or implied, as to the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any such information. Under nocircumstances shall MOODY’S have any liability to any person or entity for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error (negligent or otherwise) orother circumstance or contingency within or outside the control of MOODY’S or any of its directors, officers, employees or agents in connection with the procurement, collection, compilation,analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatory or incidental damages whatsoever (includingwithout limitation, lost profits), even if MOODY’S is advised in advance of the possibility of such damages, resulting from the use of or inability to use, any such information. The credit ratings andfinancial reporting analysis observations, if any, constituting part of the information contained herein are, and must be construed solely as, statements of opinion and not statements of fact orrecommendations to purchase, sell or hold any securities. NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FORANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER. Each rating or otheropinion must be weighed solely as one factor in any investment decision made by or on behalf of any user of the information contained herein, and each such user must accordingly make its ownstudy and evaluation of each security and of each issuer and guarantor of, and each provider of credit support for, each security that it may consider purchasing, holding or selling. MOODY’S hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MOODY’S have,prior to assignment of any rating, agreed to pay to MOODY’S for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,400,000. Moody’s Corporation (MCO) andits wholly-owned credit rating agency subsidiary, Moody’s Investors Service (MIS), also maintain policies and procedures to address the independence of MIS’s ratings and rating processes.Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC anownership interest in MCO of more than 5%, is posted annually on Moody’s website at www.moodys.com under the heading “Shareholder Relations — Corporate Governance — Director andShareholder Affiliation Policy.”


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