Dec 17 Moody's Investors Service downgraded
Venezuela's credit rating on Monday and warned it could cut them
again given what it saw as the growing risk of an economic and
financial collapse in the country.
It was the second ratings downgrade in just a few days for
the country after Standard & Poor's cut its bond ratings on the
"radicalization" of economic policy and declining international
President Nicolas Maduro spooked investors last month by
forcing retailers to slash the prices of consumer goods as part
of an "economic offensive" to rein in annualised inflation of 54
percent, a move critics say will spur shortages down the road.
The populist move helped the ruling Socialist Party,
however, to a strong showing in local polls earlier this month
that shored up Maduro's political standing.
Moody's said it cut Venezuela's local and foreign currency
ratings to Caa1 from B1 and B2, respectively, while the outlook
for the rating was negative.
"The downgrade reflects Moody's view that Venezuela is
facing increasingly unsustainable macroeconomic imbalances,
including a sky rocketing inflation and a sharp depreciation of
the parallel exchange rate," the agency said.
"As government policies have exacerbated these problems, the
risk of an economic and financial collapse has greatly
It cited high inflation, a black market exchange rate 10
times the official level, widespread shortages of goods, a
shrinking current account surplus, "perilously" low foreign
exchange reserves and "anaemic" 1.4 percent growth during the
first three quarters of 2014.
"A sharp increase in Venezuela's sovereign yields to more
than 15 percent in early December from less than 10 percent in
mid-May suggests the country's ability to access markets has
been severely curtailed," it added.
Moody's said the negative outlook reflected its expectation
that conditions would continue to deteriorate. However, the
outlook could stabilize if macroeconomic imbalances are reduced
to levels that do not threaten an economic collapse, it added.