Vene Outlook Negative: Fitch

Fitch has changed the outlook on Venezuela’s B+ rating to negative from stable, it says, based on a weakening policy framework. The agency sees increased vulnerability to commodity price shocks and deterioration in fiscal and external credit metrics as well as rising political uncertainty related to the 2012 electoral cycle. The main issues are “an exchange rate regime that leads to macroeconomic distortions and rising foreign currency indebtedness, a markedly expansionary fiscal policy and the transfer of the country’s oil windfall to opaque off-budget funds have weakened Venezuela’s external and fiscal credit metrics as well as increased its dependence on high oil prices,” Fitch says. The sovereign’s external liquidity and the sovereign’s net external position have deteriorated vis-a-vis peers in the “B” category and oil exporters in spite of large current account surpluses in recent years.