U.S. companies face billions in Venezuela currency losses, Reuters analysis shows

Mon Feb 2, 2015 3:29pm EST
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By Tim McLaughlin

(Reuters) - At least 40 major U.S. companies have substantial exposure to Venezuela’s deepening economic crisis, and could collectively be forced to take billions of dollars of write downs, a Reuters analysis shows.

The companies, all members of the S&P 500, and including some of the biggest names in Corporate America such as autos giant General Motors (GM.N: Quote) and drug maker Merck & Co Inc (MRK.N: Quote), together carry at least $11 billion of monetary assets in the Venezuelan currency, the bolivar, on their books.

The official rate is at 6.3 bolivars to the dollar and there are two other rates in the government system – known as SICAD 1 and SICAD 2 – at about 12 and 50. The black market rate, though, was at about 190 bolivars to the dollar on Sunday, according to the website dolartoday.com.

The problem is that the dollar value of the assets as disclosed in many of the companies' accounts is based on either the rates at 6.3 or 12 and only a limited number of transactions are allowed at those rates. The assets would be worth a lot fewer dollars at the 50 rate in the government system and the dollar value would almost be wiped out at the black market rate.

The currency system is also about to be shaken up following an announcement by Venezuela President Nicolas Maduro on Jan. 21, leading to fears of a further devaluation. 

American companies will also have additional exposure to the bolivar that isn't disclosed because they don't see the size of that exposure as material to their results. The Reuters analysis also doesn't look at the thousands of publicly traded and private American companies that aren't in the S&P 500 and will in some cases have bolivar assets.


BLACK MARKET RATE   Continued...

People walk past a closed Chevrolet branch in Caracas January 30, 2015.  REUTERS/Carlos Garcia Rawlins