INSIGHT-U.S. companies likely to take further big hits from Venezuela economic turmoil
By Tim McLaughlin
BOSTON Jan 19 (Reuters) - A slew of major U.S. corporations are likely to announce in the next few weeks whether they will take big writedowns for their troubled Venezuela operations, and some may say they are leaving the country altogether.
The companies may decide to slash the valuations of their businesses and take charges based on declines in some of the oil producing nation's four exchange rates for the bolivar currency, of which three are official and one black market, and then deconsolidate the operations on their balance sheets, Wall Street securities analysts said.
They may have more reason to accelerate the process after the socialist government on Friday declared a 60-day economic emergency, which would give President Nicolas Maduro wider powers to intervene in companies or limit access to already scarce dollars in Venezuela.
It also disclosed that the nation's economy contracted by 4.5 percent in the first nine months of last year while the official annual inflation rate was the world's highest at 141.5 percent in that period, as plunging oil prices, and what critics of Maduro see as policy missteps, took an increasing toll.
Venezuela's Information Ministry did not immediately respond to an email seeking comment.
The Reuters analysis shows that U.S. companies with exposure could face total writedowns of more than $3 billion if they revalue their assets in Venezuela using the less preferential Simadi exchange rate of nearly 200 bolivars to the dollar. In the past, many companies valued their assets using the main official rate of 6.3 bolivars per dollar.
But even that change may not reveal the full extent of the problem given that the black market exchange rate has worsened to about 878 bolivars to the dollar from about 190 bolivars a year ago, according to dolartoday.com, a website that tracks the rate.