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Inflation has been credited with being the main reason for Moody’s Investor service choosing to downgrade Venezuela. In terms of currency, inflation has been more than fifty percent year to date, even after President Nicholas Maduro created the law to make businesses cut the cost of consumer goods. The high risk of a collapse and the economic imbalances of the Venezuelan economy have also been cited as a reason for the downgrade because the caused currency and bond ceiling ratings to move to a “speculative” grade. The government is planning on devaluing the Venezuelan currency in 2014. The current account surplus has also decreased by thirty five percent for the past three quarters in comparison to the three quarters last year. All of these statistics point to an economic collapse, but there might just be a way out.
Moody’s Investors Service cited all of these statistics when the firm downgraded Venezuela. If Venezuela can find a way to fix their economic problems such as currency and GDP growth, Moody would be able to upgrade the country again. Being the largest crude oil producer in Latin America, Venezuela needs to figure out how to gain control of their economy and politics in order to keep the supply consistent. The only thing keeping Venezuela alive at this point is their dominance in crude oil, but if the economy collapses, oil will serve no benefit to the country. Success lies in the hands of management for Venezuela. Will the government be able to strengthen both the political and economical stability for the country of Venezuela?
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