20150420-穆迪服务-Venezuela_s_Sovereign_Risk_Remains_Elevated,_With_Deep_Structural_Challenges_19页_1mb

Venezuela's Sovereign Risk Remains Elevated, With Deep Structural Challenges

Core Content Overview

This report from Moody's Analytics provides an analysis of Venezuela's sovereign risk, highlighting the elevated levels of risk as measured by the Sovereign EDF (Expected Default Frequency) and market-implied ratings. It also includes a comparative analysis of sovereign risk across several countries in the Asia-Pacific and Europe regions.

Key Information on Venezuela

• Sovereign EDF (1-Year): Increased slightly from 23.47% at the start of the week to 24.97% by April 17, 2015, reflecting an increase in near-term sovereign default risk. It peaked at 35% in mid-March but has since declined.
• Sovereign EDF (5-Year): Rose modestly, currently at 18.07%, which is significantly lower than the one-year measure but still indicates an elevated risk of default over the longer term.
• Market Implied Credit Rating: The one-year CDS-implied EDF suggests a credit rating of Ca, indicating a high risk of default.
• Government Measures: The government restricted the amount of hard currency that citizens can receive at the official exchange rate, lowering the cap from $2,500 to $700, which helped reduce the near-term risk of an external crisis.
• Economic Challenges: Venezuela's economy is in deep trouble due to a combination of falling oil prices (which account for 97% of export revenues) and severe economic mismanagement. Oil exports fell 16% in 2014 and are expected to decline another 30% in 2015.
• Inflation: Inflation has surged to over 100%, although official data has not been published since December 2014, when CPI growth was 69%.
• Exchange Rate: The official exchange rate sets the bolivar at 12 per USD, while the black market rate is near 260 per USD, indicating a 75% depreciation since mid-2014.
• Fiscal Deficit: The government is running modest fiscal deficits, with total government debt at 45% of GDP, but the country remains vulnerable to an external payments crisis.
• Bond Market Reaction: Government bond prices increased following the announcement of the currency restriction, with the 2022 bond rising 3% and the 2038 bond rising 4%.

Main Points and Analysis

• Venezuela's sovereign risk remains elevated, but there is some reduction in near-term risk due to government actions.
• The structural challenges in the economy are not resolved, and the risk of a sovereign event is still present.
• The external position of the country is perilous, with a high dependence on oil exports and limited private sector participation in generating hard currency.
• The official exchange rate is misaligned with the black market rate, leading to currency depreciation and inflationary pressures.
• Despite the government's efforts, the one-year EDF remains high, suggesting that market signals still reflect a significant risk of default.

Comparative Analysis (Selected Countries)

Asia-Pacific

• Australia: Sovereign EDF (1-Year) at 0.01%, with a slight decrease over the period. CDS Implied-Rating: A1.
• China: Sovereign EDF (1-Year) at 0.04%, with a slight decrease. CDS Implied-Rating: Baa3.
• Hong Kong: Sovereign EDF (1-Year) at 0.02%, with minimal changes. CDS Implied-Rating: Baa1.
• Indonesia: Sovereign EDF (1-Year) at 0.08%, with a slight decrease. CDS Implied-Rating: Ba1.
• Japan: Sovereign EDF (1-Year) at 0.01%, with minimal changes. CDS Implied-Rating: A3.
• Philippines: Sovereign EDF (1-Year) at 0.04%, with a slight decrease. CDS Implied-Rating: Baa3.
• Vietnam: Sovereign EDF (1-Year) at 0.08%, with a slight decrease. CDS Implied-Rating: Ba2.

Europe

• Austria: Sovereign EDF (1-Year) at 0.01%, with minimal changes. CDS Implied-Rating: Baa1.
• Belgium: Sovereign EDF (1-Year) at 0.01%, with minimal changes. CDS Implied-Rating: Baa3.
• Croatia: Sovereign EDF (1-Year) at 0.13%, with a slight increase. CDS Implied-Rating: B2.
• Cyprus: Sovereign EDF (1-Year) at 0.38%, with a slight decrease. CDS Implied-Rating: Caa1.
• Denmark: Sovereign EDF (1-Year) at 0.01%, with minimal changes. CDS Implied-Rating: Aaa.
• Finland: Sovereign EDF (1-Year) at 0.01%, with minimal changes. CDS Implied-Rating: Aaa.
• Germany: Sovereign EDF (1-Year) at 0.01%, with minimal changes. CDS Implied-Rating: Aaa.
• Iceland: Sovereign EDF (1-Year) at 0.08%, with a slight decrease. CDS Implied-Rating: Ba1.
• Italy: Sovereign EDF (1-Year) at 0.05%, with minimal changes. CDS Implied-Rating: Baa3.
• Latvia: Sovereign EDF (1-Year) at 0.03%, with a slight decrease. CDS Implied-Rating: Baa2.
• Lithuania: Sovereign EDF (1-Year) at 0.03%, with a slight decrease. CDS Implied-Rating: Baa2.
• Netherlands: Sovereign EDF (1-Year) at 0.01%, with minimal changes. CDS Implied-Rating: Aaa.
• Norway: Sovereign EDF (1-Year) at 0.01%, with minimal changes. CDS Implied-Rating: Aaa.
• Poland: Sovereign EDF (1-Year) at 0.02%, with a slight decrease. CDS Implied-Rating: Baa1.
• Portugal: Sovereign EDF (1-Year) at 0.05%, with a slight decrease. CDS Implied-Rating: Baa3.
• Romania: Sovereign EDF (1-Year) at 0.05%, with a slight decrease. CDS Implied-Rating: Baa3.
• Russia: Sovereign EDF (1-Year) at 0.34%, with a slight increase. CDS Implied-Rating: B3.
• Slovenia: Sovereign EDF (1-Year) at 0.05%, with a slight decrease. CDS Implied-Rating: Baa3.

Conclusion

Venezuela's sovereign risk remains elevated, with structural challenges continuing to pose a significant threat. While recent government actions have reduced near-term risk, the long-term outlook is still concerning. The report also highlights that other countries in the Asia-Pacific and Europe regions show varied levels of risk, with most experiencing minimal changes or slight improvements in their sovereign risk indicators.