U.S. companies rush to insulate themselves against Venezuela's currency, economic woes

jueves 14 de mayo de 2015 01:00 GYT

By Brian Ellsworth, Dena Aubin and Tim McLaughlin

CARACAS/NEW YORK May 14 (Reuters) - A growing number of U.S. companies say they can't cope with Venezuela's sinking bolivar currency, prompting some of them to remove their operations in the South American nation from their consolidated financial reports. In other cases, they have exited the country altogether through a sale or by simply shuttering their businesses there.

Many of those recently taking such action are medium-sized or small companies, which means that the tumbling currency and a deeply troubled Venezuelan economy have tended to have a disproportionately greater impact on their results than suffered by bigger entities with business in the country.

The restructuring moves can shield the financial results of parent companies such as batteries and razors maker Energizer Holdings, automated teller machine and bank vault provider Diebold Inc and printing and publishing company RR Donnelley & Sons from Venezuela's economic troubles. But they can also signal that the Venezuelan business is no longer regarded as worth fighting for, and support from the American headquarters cannot be counted on.

Deconsolidating Venezuelan operations, for example, is an accounting maneuver that means the business in that country can no longer hurt or benefit a parent company's financial results. Often companies are taking a big one-time charge so that they can ring fence what is left in Venezuela.

"There's something about a deconsolidated subsidiary, even though you may own all or a majority of it, that makes management regard it as much more of a third party than ownership would imply," said veteran Wall Street accounting and tax expert Bob Willens, who now runs his own firm.

The socialist government of President Nicolas Maduro forced some companies to take drastic measures through a 70 percent devaluation of the bolivar in February via a newly-created currency system known as Simadi. Authorities now provide dollars to state-run companies and a select group of private businesses at a preferential rate of 6.3 bolivars, mainly for priority goods such as medicine, but also sell the U.S. currency at a rate of nearly 200 for many other goods. The bolivar's black market rate is even weaker - at almost 302 to the dollar on Wednesday - according to the website dolartoday.com.   Continuación...