The Impending Collapse Of Venezuela
On Tuesday January 13th, the ratings agency Moody’s downgraded Venezuela to Caa3, one step above default. This comes as no surprise – markets have been pricing in the likelihood of default for some time now.
Curiously, though, Moody’s changed the outlook from negative to stable:
The stable outlook is based on Moody’s view that even if the oil price drops further, expected losses to bondholders are likely to be consistent with a Caa3 rating and unlikely to reach levels associated with lower ratings.
This is too generous. Moody’s assessment assumes that Venezuela’s problem is mainly a balance of payments crisis caused by a rapidly falling oil price and inadequate foreign reserves. But the reality is different – and far worse.
http://www.forbes.com/sites/francescoppola/2015/01/13/the-impending-collapse-of-venezuela/
