Vene Dropped Again

Venezuela has seen another rating downgrade, this time to Caa1 from B2 by Moody’s. “Venezuela is facing increasingly unsustainable macroeconomic imbalances, including a skyrocketing inflation and a sharp depreciation of the parallel exchange rate. As government policies have exacerbated these problems, the risk of an economic and financial collapse has greatly increased,” the agency says. Inflation is “out of control” at more than 50%, and the parallel exchange rate has reached, 64 VEB/USD, or 10 times the official rate. Sovereign yields have reached more than 15% in early December from less than 10% in mid-May, suggesting the country’s ability to access markets has been “severely curtailed.” The outlook is negative. The move follows an S&P downgrade last week to B minus.