Fitch rates Venezuela notes B-

Fitch Ratings said it will rate Venezuela's new U.S. dollar notes maturing September 2004 and its new Venezuelan bolivar notes maturing March 2008 and September 2008 B-.

The notes will be sold together in investment units but will subsequently trade separately.

The outlook is stable.

Proceeds of the notes will be used to finance debt amortizations and the budget deficit.

Fitch said Venezuela's sovereign ratings balance a comparatively modest public external debt burden and relatively strong external liquidity against substantial political risks and a policy framework inconsistent with the medium-term objective of sustainable economic growth and diminished dependence on petroleum.

The current expansionary fiscal and monetary stance in the context of capital controls and an overvalued exchange rate will face increasing pressures this year as the domestic debt market becomes more saturated and inflation will likely rise.

Should the inevitable relaxation of external controls become disorderly and trigger sizeable capital flight, the comfortable external liquidity position could unravel and domestic debt markets could dry up relatively quickly. Similarly, a rapid decline in crude oil prices would pressure both fiscal and external balances, particularly since the bulk of the oil stabilization fund (formerly known as the FIEM) was spent during last year's political crisis.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.