Venezuela Debt Rating Outlook Raised to Stable by S&P

[Judi Lynn]

Venezuela Debt Rating Outlook Raised to Stable by S&P
By Steven Bodzin

Jan. 11 (Bloomberg) -- Venezuela’s credit rating outlook was raised to stable from negative by Standard & Poor’s, which said last week’s currency devaluation will ease the country’s “fiscal pressures.”

S&P rates Venezuela BB-, three levels below investment grade.

President Hugo Chavez on Jan. 8 devalued the 2.15-per dollar exchange rate, setting a level of 2.6 for imports of essential items including food and medicine and a rate of 4.3 for “non-essential” products.

“The latest government devaluation of the currency, combined with prospects for stable oil revenues, will reduce Venezuela’s fiscal pressures,” S&P said in a statement.

http://www.bloomberg.com/apps/news?pid=20601086&sid=atzVz7SMZNnU

[bemildred]

1. This can't be right, I read that Venezuela's economy is collapsing?

:popcorn:

[social_critic]

7. They raised the rating to "better junk" status LOL

The Venezuelan economy isn't collapsing, it's more of a slow downward spin. Their bonds are rated very low, and if they keep borrowing money the way they are they'll default. The devaluation was badly needed, but it was mishandled by creating a dual tier, and they're still trying to defend the currency in the unofficial black market - which is still alive and well. So they got THREE exchange rates going, which is quite funny if it wasn't so tragic to see them juggle it the way they are.

Their tendency to go with state enterprises, use of primitive barter style trade, and overall lack of management ability by senior government officials is going to destroy their economy in the long term, unless they have regime change in a hurry.

[bemildred]

11. But this in an increase in their credit rating.

Which suggests not merely stable but improved ability to pay. I just don't know who to believe. Read this story:

EMERGING MARKETS-Venezuelan bonds surge, Argentine debt slips

NEW YORK, Jan 11 (Reuters) - Venezuelan bond prices jumped
on Monday after President Hugo Chavez devalued the country's
currency while Latin American stocks rose, led by a closing
record high set by surging Chilean stocks.

The Chilean peso also strengthened on wider dollar weakness
and rising prices for copper, Chile's main export, but other
regional currencies slipped, especially a sharp drop in the
Mexican peso after last week's big gains.

Venezuela's benchmark 2027 bond VENGLB27=RR soared about
4 percent on the first business day after the devaluation of
the bolivar, which Chavez announced Friday night. For details,
see

The devaluation strengthened the Venezuelan finances as it
will double oil-export revenues in local currency terms and
reduced the government's borrowing needs for the year.

http://www.reuters.com/article/idUSN0653709320100111?type=usDollarRpt

[social_critic]

12. Sure but

They were like a plane headed down, vertical and at full throttle. Now they're just a plane going for an emergency landing at 300 mph, and they can't see the runway. The devaluation was badly needed, they should have done it three years ago. Now, it's too late. If you're considering those bonds as an investment, you got to be really rich, or crazy. If you are interested in the Venezuelan economy's prospects, do some research, it's pathetic.

They're on schedule to have the worst performance in Latin America for 2010. The devaluation will avoid a complete crash, but the lack of electric power and the inability to produce and refine oil are going to kill them. And the rest of their economy is a shambles, they can't grow food to feed themselves, import almost everything, can't manufacture much, and the communist mentality makes them threaten those industries which could otherwise be viable. To make matters even worse, they have a serious crisis with their health system, their University system is starting to break down, and they spend money they don't have buying useless weapons they won't ever use.

Haiti, Cuba, Ecuador and Venezuela are the basket cases for 2010 and 2011. The so-called leftist revolution in Latin America is going to be crippled by Chavez and friends, who will ever follow a leftist after they're finished ruining the Venezuelan economy?

[bemildred]

13. So you disagree with S&P then. nt

[Peace Patriot]

2. Thanks for this info! I've been trying to explain to DU anti-Chavez wingers that this is a positive

sign. For one thing, it means that the Chavez government's economists and financial managers are so confident about Venezuela's prospects that they could take the risk of this voluntary (long needed, long expected) devaluation. They did this even at the risk of added inflation. That means LOTS of confidence. And why shouldn't they be confident? They were just coming off five years of steady, spectacular economic growth, 2003 to 2008, when the Bushwhack Financial 9/11 hit the world. Their social indicators--results of their on-going full funding of social programs--are also stunning. They have low debt, high cash reserves and lots of flexibility in budgeting.

But trying to present FACTS to DU's anti-Chavez wingers is like trying to convince people who believe that 'TRADE SECRET' vote counting, run by private rightwing corporations, is okay, that it isn't. The facts so shatter their world view--or they are so demented and/or such committed operatives of corporate rule--that they can't or won't absorb facts much less analyze them and modify their views.

I just came off a thread where they're calling Chavez a "fool," a "clown," a "fascist" (?!), Robert Mugabe and more. He's "ruining Venezuela's economy," don't ya know? And S&P just quietly notes that the Chavez government (ONCE AGAIN) made the right financial move.

And they won't be able to absorb this either.

[social_critic]

8. Interesting spin

What it means is they were like cornered rats and had no options left. Has nothing to do with "confidence", it has to do with a group of folk who are in way over their heads trying to buy time. It's going to fail, and their economy is headed into Cuba-North Korea territory. They'll be eating their dogs soon.

[Downwinder]

9. A race for the FINISH, be interesting to see who gets there first.

[social_critic]

14. Once again?

The Chavez regime has been known for making lousy moves for a long time. The slight uptick in the bonds is a change from "nearly dead" to "very sick". Their choice of a two tiered exchange rate, plus their plans to continue to "manage" the exchange rate means Venezuela has three exchange rates, two controlled and one which the government tries to control. The existence of three rates creates grounds for massive corruption, and is very inefficient. Your geniuses are running a hyperinflated economy with a DROPPING GDP, increasing inflation, increasing unemployment, and dropping production in both the industrial and agricultural sector. Their radical communist sloganeering is scaring the middle class, and most smart Venezuelans who can do so are leaving the country. Now tell us how smart your communists in Caracas are?

[ChangoLoa]

3. Restrictive budgetary policy in times of recession

served with a high inflation scenario... How progressive it is to "ease the fiscal pressures"!

[Bacchus39]

5. from the looks of the lines of people waiting to buy products before the price increases

it would appear the ordinary citizen isn´t too thrilled with this measure.

[ChangoLoa]

6. Lines were huge today.

People are scared because they know that the little money they have will be worth nothing in very little time.

[ChangoLoa]

4. JPMorgan sube bonos Venezuela tras devaluación

JPMorgan elevó su recomendación para los bonos venezolanos a "superior a promedio de mercado" en su cartera modelo EMBIG, desde la anterior "similar a promedio de mercado", debido a los efectos positivos de la devaluación de su moneda, el bolívar, en su posición fiscal.

En una nota fechada en la noche del lunes, el banco dijo: "la devaluación de la moneda es, de modo inequívoco, positivo para las cuentas fiscales y debería limitar la oferta de deuda externa", reseñó Reuters.

"Con el escenario externo aún positivo y los precios del petróleo en alza, subimos la recomendación de Venezuela a 'superior a promedio de mercado' en nuestra cartera modelo EMBIG", agregó.

El viernes, Venezuela devaluó su moneda, al reducir el valor del bolívar en hasta un 50 por ciento frente al dólar.

Link:
http://www.eluniversal.com/2010/01/12/eco_ava_jpmorgan-sube-bonos_12A3277933.shtml

[social_critic]

10. I wouldn't buy Venezuelan bonds

The government is way too erratic, and they are likely to default. Buy Toyota corporate bonds instead, they pay a much lower interest rate, but they'll pay off.