Thursday, December 18, 2014

Fitch Downgrades Venezuela

The totalitarian rule in Venezuela is making a mess out of the Venezuelan economy, on top of the declining oil price. 

Fitch Ratings has downgraded Venezuela's Long-term foreign and local currency Issuer Default Ratings (IDRs) from 'B' to 'CCC'. The issue ratings on Venezuela's senior unsecured foreign and local currency bonds are also downgraded from 'B' to 'CCC'. The Country Ceiling is downgraded from 'B' to 'CCC' and the Short-term foreign currency IDR from 'B' to 'C'.

According to Fitch, lower oil prices coupled with  macroeconomic instability has increased, driven by the inconsistency between FX, and fiscal and monetary policies. Continued rationing of FX, widespread price controls, and monetary financing have fueled inflationary pressures. Inflation averaged 55% in the first eight months of 2014. The spread between the official and parallel exchange rates continues to widen at a rapid pace, thus further fueling inflation and currency pressures. Fitch estimates that the economy may have contracted by close to 4% in 2014 and expects Venezuela to remain in recession in 2015.

1 comment:

  1. Using Marxist rhetoric to rob the rich in order to buy votes from the faithful Catholic poor is a lot more lucrative than trying to please Fitch.