Reuters has a lengthy article about how the growing economic mess in Venezuela along with the weakness of its Bolivar and restrictive currency controls have hurt US corporate profits for the fourth quarter of 2014 and will continue to cause more pain this year. Without going into the details of why the country is imploding (other than to say that socialism isn’t working out too well….), here is a quick summary of the situation certain US companies now find themselves according to Reuters:
- American Airlines Group Inc (NASDAQ: AAL) had $721 million held in Bolivars at a weighted average exchange rate of 6.41 Bolivars to the dollar. At the current blackmarket rate of 184 Bolivars per US dollar, its worth $25 million and they will provide guidance about how they are going to deal with that problem with their earnings report this week (Its probably safe to assume that no one will exchange that many dollars for bolivars…)
- Clorox Co (NYSE: CLX) decided last year to exit Venezuela altogether (“We saw no hope that we could create a sustaining business in that country” according to the CEO).
- Ford Motor Company (NYSE: F) will take a pre-tax charge of $800 million for its Venezuela business.
- Kimberly Clark Corp (NYSE: KMB) is taking a fourth-quarter charge of $462 million for its Venezuelan business.
- Procter & Gamble Co (NYSE: PG), General Electric Company (NYSE: GE), Baker Hughes Incorporated (NYSE: BHI) and Brink’s Company (NYSE: BCO) have already reported Bolivar related financial hits over the past year.
Moving forward, its likely that more US MNCs with operations in Venezuela will deconsolidate their Venezuelan subsidiaries in order to isolate them from the parent company’s financials – a move that Ford Motor Company has already taken.
To read the whole article, Venezuela’s currency woes an increasing threat to U.S. corporate profits, go to the website of Reuters plus check out our list of the few remaining Venezuela ADRs here.
Similar Posts:
- Disorderly Venezuela Default on an Argentina scale is Almost Inevitable (FT)
- In Socialist Venezuela, Hungry Soldiers are Stealing Goats (CNBC)
- Socialist Venezuela Runs Out of Beer
- Emerging Market Companies & Governments Binge on US Dollar Debt (WSJ)
- Venezuela is Borrowing Money at Any Cost (WP)
- Venezuela Seizes General Motors’ Assembly Plant (NYT)
- Why Venezuela Can’t Be Like Colombia (RealClear World)
- Thanks to US Pressure, Maduro’s Reckoning is Coming (The Hill)
- Petróleos de Venezuela (Pdvsa) Now Verges on Collapse (NYT)
- Venezuelan Opposition Threatens Country Won’t Pay Goldman Sachs’ $2.8B Bond Deal (CNBC)
- In No Good Hands: The Venezuela Crisis and Consequences for South America (Moody’s Analytics)
- New Fragile Five Facing a Forex Crisis: Argentina, Brazil, South Africa, Ukraine & Venezuela (Institutional Investor)
- Why Have Venezuela’s Elites Stuck by President Nicolás Maduro? (NYT)
- Venezuela – A Multi-Bagger Recovery Play?
- Mexico Closed End Fund Stock Picks (Early 2023)
