Ratings agency Standard and Poor's on Monday downgraded Venezuelan long-term credit ratings to CCC from CCC+, citing falling oil prices and the government's failure to address economic distortions.
S&P said Venezuela's economy could shrink 7% this year, with further contraction possible in 2016. It added inflation could reach 100% or more this year, primarily as a result of continuing shortages of basic goods.
We believe pressure is growing for the government to reschedule some of its market debt or undertake a liability management operation to refinance some of its maturing debt over the next year or two, S&P said in a statement.
Venezuela's three-tiered exchange control system and hefty fuel subsidies are seen draining the country's international reserves and reducing its ability to service foreign debt.
Its bonds are trading at distressed levels with annual yields between 20 and 53%.
S&P added that it sees a one-in-two chance that in 2015 or 2016 it could lower Venezuela's sovereign credit rating to selective default, which could be the result of a debt exchange undertaken in distressed circumstances.
Venezuelan bonds have rebounded since last week as oil prices picked up. The country's Global 2027 was up 3 points on Monday to yield 23.439 percent.
President Nicolas Maduro has vowed to honor commitments and dismissed default talk as rumor-mongering by enemies. And many Wall Street investors continue to hold Venezuelan securities, noting Venezuela's sizeable oil reserves and its strong track record of paying its debt.
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many Wall Street investors continue to hold Venezuelan securities - you are a better man than me, Gunga Din!Feb 10th, 2015 - 09:01 am 0
Good luck to them, they'll need it, 'cause CCC = grab whatever you can and get out of there ASAP.
I wonder what Maduro's little bird has to say about it?
Nothing like stating the blindingly obvious: what took them so long?Feb 10th, 2015 - 10:08 am 0
I have to laugh as the article mentions ...bonds have rebounded since last week as oil prices picked up. The WSJ reports that oil is going to remain in the sub $55 a barrel range for the long term. Madero needs at least $100 just to keep his train wreck going forward. Other than petroleum, the only other valuable exports he has are beauty queens and baseball players...Feb 10th, 2015 - 03:46 pm 0
Chile has been receiving an increasingly large number Venezuelans fleeing their country. A significant number of those are middle class professionals with their families due to the rising political instability, economic deterioration and terrible acts of violence.
Chile is perhaps the safest and most stable country in Latin America with excellent private health care, education and business opportunities.
At the supermarkets here they can obtain virtually nearly anything they wish here including Venezuelan arepa flour, feminine hygienic products and toilet paper. (Perhaps its because Chilean authorities tend not to arrest CEO's of our supermarket chains here or seize private companies.)
Free market, open economy and an independent central bank also helps.