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Fitch Comments on Venezuela's Regime Change.

Business Editors

NEW YORK--(BUSINESS WIRE)--April 12, 2002

Fitch Ratings said today that the interruption of democracy in Venezuela is a concern, but that a smooth democratic transition underscored by early elections could underpin a stabilization of sovereign creditworthiness in South America's largest oil exporter. Fitch currently rates the Bolivarian Republic of Venezuela's long-term foreign currency obligations 'B+' and long-term local currency (Venezuelan Bolivar) obligations 'B'. The Rating Outlook remains Negative.

The polarization of Venezuelan society over President Hugo Chavez's policies became apparent in recent months, resulting in capital flight, an economic standstill, an interruption of oil production, and ultimately bloodshed yesterday. With this as a backdrop, early this morning a group of high ranking military officers demanded President Chavez resign, and Pedro Carmona Estanga, the president of the Venezuelan Business Council (Fedecamaras), was presented as the head of a transitional government which will govern Venezuela until elections are held (at a yet to be determined date). Carmona also announced an end to the national strike declared this week, which had paralyzed the country.

The situation remains dynamic and any rating action or change in outlook is likely to await the resolution of the current political crisis. If calm can return to Venezuelan politics; democracy can be restored sooner rather than later; international recognition of the democratic process is forthcoming; oil production and exports resume at normal levels; adequate public debt service management is maintained; and sound economic policies are pursued; then, Fitch believes that the potential for a return to a stable outlook on Venezuela's ratings exists. On the other hand, should political uncertainty persist (punctuated by continued civil strife); should the new government fail to reduce the fiscal deficit and present a credible monetary policy framework; and should capital flight resume; pressure on sovereign creditworthiness could continue in the near-term.
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Publication:Business Wire
Date:Apr 12, 2002
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