(The following statement was released by the rating agency)
NEW YORK, September 03 (Fitch) Venezuela's policy adjustments to
exchange (FX) constraints and address macroeconomic and fiscal
been limited and slow, leading to continued FX scarcity,
prospects and high inflation, according to a special report
published today by
'The prospects for policy adjustments to reduce in macroeconomic
strengthen the sovereign's balance sheet do not appear promising
in spite of the
introduction of a three-tier FX system and the de-facto
devaluation of the VEF
earlier in 2014,' said Erich Arispe, Director in Fitch's Latin
Group. In addition, Venezuela's economic policies tend to be
hard to predict,
with the timing and type of future adjustments depending on the
calendar as well as political and social pressures.
'The lack of sustained and coherent policy adjustments could
lead to further
erosion in external buffers, macroeconomic and financial
heightened risk of social unrest given the country's political
added Arispe. These dynamics continue to undermine the
profile, as reflected in Fitch's downgrade of Venezuela to 'B'
in March, as well
as the sovereign's continued Negative Outlook.
Expansionary fiscal policies continue to fuel inflation and
reduce FX policy
credibility. While the devaluation is likely to benefit
revenues, expenditure pressures and high inflation threaten to
erode any gains
on the revenue side. In addition, high inflation has led to
rate overvaluation, flattering Venezuela's debt metrics and
growth benefits from the exchange rate adjustments.
While Venezuela's government-control of oil-derived FX inflows
have provided the
authorities with some policy flexibility in the past, softer oil
weakening external liquidity, a fast-contracting economy and
political tensions have reduced Venezuela's ability to manage
and macroeconomic pressures.
Fitch's special report 'Venezuela: The Limits of Policy
Gradualism - The Impact
of Foreign Exchange Policy Adjustment' is available at
Fitch Ratings, Inc.
New York, NY 10004
Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908
Additional information is available at www.fitchratings.com.
Applicable Criteria and Related Research:
Sovereign Rating Criteria (August 2014)
Applicable Criteria and Related Research: Venezuela: The Limits
Sovereign Rating Criteria
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