Venezuela: new downgrade of the country to the brink of … – The Tribune.fr

Venezuela on the brink? For financial markets, it is no longer in doubt. The rating agency Moody’s has to realize that fear by degrading its assessment of the sovereign signature of Latin American countries.

The note just went Caa3, two notches below Caa1, which was already a “high risk”. For the US agency, Caracas presents a risk of bankruptcy that has “increased significantly” which earned him now ranked among borrowers “very high risk”. The announcement comes less than a month after its degradation by other US rating agency. On December 18, Fitch had actually lowered its assessment by two notches from B to CCC.

An economy deteriorated substantially

The reason for this degradation due to the oil price collapse which the country is excessively dependent. Monday, January 12 in London, Brent crude ended at $ 47, while it was trading around $ 110 six months earlier.

For Moody’s, the decline of the black gold has a impact on the balance of payments and the country’s foreign exchange reserves. The country should, according to the US agency, post its first current account deficit since 1998, and is expected to reach 2% of GDP. Other analysts cited by AFP consider, for their part, that the public deficit could reach 19% of GDP in 2015.

But the Venezuelan economy has deteriorated before the start of the cycle drop of oil. In 2014, GDP contraction started in the first quarter at the rate of 4.8% and 4.9% in the second quarter. In the third quarter, the decline was reduced to 2.3%. Worse! In addition to this recessionary economy, the country is also facing high inflation at the rate of 63.6% year on year in November 2014.

The riskiest OPEC

Olivier Jakob, an analyst and director of Petromatrix, Venezuela is a country with the highest risk of political destabilization among oil-producing countries.

“Venezuela is truly at risk. The government is under pressure. Although China has helped the country in recent years, it is not certain that it continues to do so and increase their risk for this country “he has said in an interview in La Tribune.

Nicolas Maduro, the Venezuelan president, is currently touring the capitals of OPEC members to demand a readjustment of oil production to support oil prices. This Tuesday, Jan. 13, he talked with the Algerian president, having visited his Iranian and Saudi counterparts.