UPDATE 2-S&P cuts Venezuela debt rating to B-minus
(Recasts, adds context, background, bond prices)
Dec 13 (Reuters) - Standard & Poor's cut Venezuela bond ratings further into junk territory on "radicalization" of economic policy and declining international reserves, leaving the door open to further downgrades on concerns about growing economic distortions.
President Nicolas Maduro spooked investors last month by forcing merchants to slash prices of consumer goods as part of an "economic offensive" to rein in annualized inflation of 54 percent, a move critics say will spur shortages down the road.
S&P cut Venezuela's sovereign foreign currency credit rating to B-minus from B citing expectations of growing state intervention in the economy in the context of weak growth.
International reserves have dropped almost 20 percent over the last year. Monetary liquidity has expanded by 71 percent during the same period as the central bank has financed heavy social spending by state oil company PDVSA.
S&P maintained a negative outlook on concerns political polarization may increase the difficulty of carrying out adjustment measures such as a widely expected currency devaluation, boosting the risk of default in the next two years.
The ruling Socialist Party's strong showing in last Sunday's elections for mayors "will reinforce the trend toward more government intervention in the private sector, extending macroeconomic dislocations and further increasing the risks to economic, fiscal, and external sustainability," S&P said.
The OPEC nation's sovereign bond prices were unchanged following the news, with the Global 2034 up 2.67 percent and the remainder of the bonds in positive territory.
Venezuelan bonds are among the world's highest-yielding, with yields of several now topping 14 percent. (Reporting by Brian Ellsworth in Caracas Daniel Bases and Pam Niimi and New York; Editing by Meredith Mazzilli and Bob Burgdorfer)
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