Venezuela’s Chavez Will Remain in Office, According to Fitch Ratings

Global rating agency Fitch Ratings assigned a "B-" (outlook stable) rating to Venezuela's 30-year bonds issued on Jan 7th. Reiterated that Chavez will survive recall referendum.

Venezuelan President Hugo Chavez gives a speech on December 6, 2003, during a rally to celebrate his fifth year in office.
Photo: Venpres

Caracas, Venezuela. Jan 9, 2004 ( Global ratings agency Fitch Ratings issued a statement this Friday assigning a “B-” (outlook stable) rating to Venezuela’s 30-year bonds issued on Wednesday.

Venezuelan Finance Minister Tobias Nobrega said that the proceeds from the bonds will be used to help meet domestic bond amortizations.

According to Fitch, Venezuela’s sovereign ratings balance the comparatively modest public external debt at 29.5% of GDP and strong external liquidity of 156% against substantial political risks and a policy framework inconsistent with the objective of medium-term sustainable growth and lower dependence on petroleum.

Chavez will remain in office

Politics will heavily influence economic policies in the next nine months due to gubernatorial elections and a probable recall of the President and National Assembly lawmakers. In early December, opponents of the President collected signatures to request a recall referendum on his mandate. Venezuela’s Electoral Council will begin the process of verifying the validity of the signatures next week. Citizens who support the government made dozens of claims of fraud to the Council. If fraud claims are proven true, a significant number of signatures could be thrown out; this could result in inssuficient valid signatures to trigger the recall referendum. The month of May seems to be the most probable target date in the event that the referendum does take place. According to Fitch “the most likely outcome is that he remains in office through the end of his term in 2006”.

Chavez continues to mobilize large crowds at pro-government rallies such as this one celebrating his fifth year in office on December 7th, 2003.
Photo: Ministry of Information and Communications

Political and economic developments are closely watched by Wall Street due to the political atmosphere generated by the confrontation between the government and opposition politicians. Wall Street would prefer a more business-friendly leader for the world’s No. 5 oil exporter, as his anti-neoliberal rhetoric and cooperation with Cuba, raises concerns about future directions that country may take. However, investors have cheered Chavez’s commitment to honor international contracts and debt payments, even during hard times such as the three-month lockout and sabotage of the oil industry sponsored by the anti-Chavez opposition at the end of 2002. The lock-out aimed at toppling Chavez, caused an estimated 10 billion dollars in losses and a 29% drop of the GDP in the first trimester, as oil production was paralyzed for almost four months due to sabotages to refineries, computer systems and oil tankers by striking upper management employees.

Chavez’s approval ratings reported mostly by polling companies who are believed to be opposed to his administration, hover around 32% – 40% since they were last measured in October. Economic recovery, positive results from social programs, and a discredited opposition are factors that could help Chavez continue increasing his approval ratings.

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