Latin America

Fitch says 'default is probable' for Venezuela, lowers country's credit rating

Key Points
  • Fitch said in a release Thursday that Venezuela defaulting on its debt is "probable given the further reduction in financing options" stemming from the latest round of U.S. sanctions.
  • Fitch also downgraded Venezuela to CC from CCC on Thursday. A CC rating is just two ratings above default.
View of damages in a supermarket in Valencia, Carabobo State, on May 5, 2017, the day after anti-government protesters looted stores, set fire to cars and clashed with police, leaving at least five people injured and one dead.
Ronaldo Schemidt | AFP | Getty Images

Venezuela is more likely to default on its debt because its ability to raise money is being hampered by U.S. sanctions, according to ratings agency Fitch.

Fitch said in a statement Thursday that a Venezuela default is "probable given the further reduction in financing options" stemming from the latest round of U.S. sanctions.

The Trump administration took aim at Venezuelan President Nicolas Maduro and his government with an August 25 executive order barring trading in certain Venezuelan bonds.

The order aims to bar the Venezuelan government from issuing new debt and equity.

Fitch also lowered Venezuela's sovereign rating to CC from CCC on Thursday. A CC rating is just two ratings above default.

Venezuela has been dealing with a massive economic and humanitarian crisis in recent years. The country has been ravaged by severe food shortages, violent protests and a sky-high inflation rate.

The Latin American nation also sparked outrage in the international community after the creation of a new legislative body — composed mainly of Maduro supporters — last month. The National Constituent Assembly has the power to rewrite the constitution and is likely to solidify Maduro's power.

"The outcome of this process combined with the U.S. sanctions will likely deepen the political and policy uncertainties, aggravate the economic crisis, heighten political polarization and increase social unrest," Fitch said.