Venezuela: bonds gain after elections results

During the past days, levels on Venezuela EMBI+ Index and CDS 5 years have been decreasing, and this behavior was accentuated by last Sunday election results.

(This article is from September 2010, right after National Assemby Elections in Venezuela)


This past Sunday the National Assembly elections were held, where the government party lost his two-third majority, and thus the ability to pass every single law without discussion. This has brought a little bit of positive outlook for Venezuela, since Chavez will have less ability to enforce his policies.

Venezuela’s has suffered from an economic turndown for several years, but things have been worse during the past 12 months: annual inflation has reached 30% (one of the highest in the world), GDP fell by 2%, when in the rest of Latin America things have turn better. This only means one thing for the bond market: high yields, but also high risk. Venezuelan bonds aversion has increased along with the accentuation of president’s Chavez policies, especially the ones that have been legal thanks to his control of the National Assembly. The fact that Chavez has lost the ability to pass whichever law he wants has stabilized that market, but by no means does this imply the country will turn around overnight.

Source: Bloomberg