Sun, Aug 21, 2011 - Page 11 News List

S&P downgrades Venezuela over political worries


US ratings agency Standard & Poor’s (S&P) downgraded Venezuela’s foreign and local currency sovereign ratings by one notch on Friday, citing the country’s political risk as a credit weakness.

It cut the ratings from “BB-” to “B+” with a stable outlook, saying the decision “reflects our recently revised sovereign rating methodology’s heavier weight on political risk, which is a credit weakness for Venezuela.”

S&P said its outlook also weighed both the negative impact of Venezuelan President Hugo Chavez’s government’s interventionist investment and growth policies on the one hand, along with the country’s modest fiscal and external positions.

“In our opinion, changing and arbitrary laws, price and exchange controls, and other distorting and unpredictable economic measures have undermined private sector investment and hurt productivity — weakening Venezuela’s domestic economy,” it added in a statement. “Furthermore, the recent developments regarding President Hugo Chavez’s health could add to policy uncertainty.”

Chavez has undergone two rounds of chemotherapy in Cuba to treat a cancerous tumor in his pelvic area. Since returning to Caracas, he has publicly announced plans to run for a third presidential term.

The S&P downgrade came after Chavez announced plans on Wednesday to repatriate 211 tonnes of gold held overseas and to nationalize gold exploration.

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